Tod’s Under Investigation for Labour Abuses, Faces 6-Month Advertising Ban

A public prosecutor in Milan is investigating Tod’s and three managers who work for the Italian label for alleged labour abuses at six factories run by suppliers and is seeking to punish Tod’s with a six-month ban on advertising, the latest blow to Italy’s fashion sector.

While Tod’s is just the latest fashion company to get swept up in a widening Milan probe into luxury’s key ‘Made in Italy’ supply chain, this is the first time a prosecutor has directly gone after a fashion label and its employees. Over the past two years, the court has slapped Armani, Dior and others with judicial administration, but always with the caveat that the companies were guilty by association rather than for having been directly involved in the abuses.

The prosecutor, Paolo Storari, contends that the three Tod’s managers ignored the findings of audits carried out at factories owned by Chinese nationals, according to court documents filed in the case. Four of the factories are near Milan and two are in the Marche region of central Italy where Tod’s is headquartered.

In October, Italian police made unannounced visits to some of the factories where authorities say they found 53 workers, most of them Chinese, underpaid, without proper contracts and in some cases living in employer-run dormitories in the same building as the factory, according to a 144-page document dated Oct. 29.

The police found evidence the factories were being run illegally around the clock; machines without their safeties on to make them produce faster; storage rooms turned into bedrooms and a two-bedroom apartment with partitions to create five bedrooms with 13 beds and two bathrooms. In one case, the wife of the factory manager served as the cook for the workers, who paid €150 ($173) a month in cash for lodging and another €100 cash for food.

In addition to the Chinese workers, there was one each from Russia, Moldova and El Salvador.

The investigation of labour abuses in the luxury goods supply chain has dogged the industry for two years, adding pressure to a sector already reeling from a sharp downturn in demand. Prosecutors say the industry’s fragmented manufacturing ecosystem – with luxury companies farming out work to well-controlled first-tier suppliers that often then sub-contract some of the work to other suppliers – is the result of an entrenched operating model that ignores labour risks in order to maximise profits.

On Wednesday, Italy’s highest court upheld a previous ruling shifting jurisdiction of the case to the Marche. It was not immediately clear how that will affect the case brought by the Milan prosecutor, who sought to keep jurisdiction in the city.

Tod’s on Thursday said it “acknowledges” that the court rejected the prosecutor’s request to keep the case in Milan.

“Regarding the new allegations concerning the same matter, the company is now reviewing, with the same composure, the additional material, produced with worrying timing, by Dr. Storari,” Tod’s said in a statement.

Tod’s has rejected the allegations with Della Valle saying that Storari must “get facts straight” and suggesting the prosecutor is only interested in the publicity the case is garnering him.

The court’s decision on the requested advertising ban is expected in the coming weeks.

Stay tuned to BoF for updates on this developing story.

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